Cisco Systems, Inc. (CSCO) Not Disclosing SEC Enforcement Actions?

Independent investment research firm Probes Reporter published a report casting doubts on tech giant Cisco Systems, Inc. (NASDAQ:CSCO)’s disclosures relating to SEC enforcement activities on Wednesday, October 8th. According to the report, “Cisco made choices regarding timing, venue, and language that appear designed to mislead investors and/or keep material information from them regarding SEC exposures.”

Details on Cisco’s ‘deceptive practices’

Based on research into Freedom of Information Act requests as far back as 2012, Probes Reporter discovered a significant amount of SEC investigative activity that has never disclosed by Cisco.

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In fact, in a 10-K filed in early October, Cisco still did not directly state it is under investigation by the SEC & DOJ for potential violations of the Foreign Corrupt Practices Act (FCPA), despite the fact the investigation been ongoing for at least a year.

Moreover, Cisco Systems, Inc.(NASDAQ:CSCO) uses such vague language to describe its FCPA exposure in the 10-K that investors and the general public may not even understand what’s going on.


Unethical “stealth disclosure”

The report points out that Cisco’s reference to its internal FCPA investigation while not directly stating that the SEC & DOJ are currently investigating company is an unethical “stealth disclosure” of an SEC probe at best.

It goes on to say that this kind of stealth disclosure “falls into the realm of sleazy disclosure tactics we sometimes see deployed by public companies.  Ego of senior executives can be a factor.  However, the motive more typically is that a public company wants to meet its obligation to disclose a material event without suffering the potential market consequences that can accompany disclosure of SEC investigations.”

The Probes Reporter closes its report with a strong criticism of Cisco Systems, Inc. (NASDAQ:CSCO)’s intentionally obfuscatory disclosure practices: “We find Cisco’s characterization of having started an internal investigation “at the request” of the government to be so misleading as to bring into question the veracity of everything else the company has disclosed about its FCPA probe.”